Ganesh Consumer Products (NSE:GANESHCP) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Ganesh Consumer Products Limited Q2 FY 'twenty seven Earnings Conference Call hosted by DAM Capital Advisors Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjay Manial from DAM Capital Advisors Limited. Thank you, and over to you, sir. Hello, and good morning, everyone. We are pleased to host Q2 FY 'twenty seven earnings call of Ganesh Consumer Products Limited.

0:48 From the company, we have with us Mr. Manish Mamani, Managing Director Mr. Amitapadia, CFO, mister Narendra Mishra, company secretary and compliance officer, and mister Sanjeev Sanjeev, investor relations adviser. I hand over the call to mister Sanjeev Sanjeev. Thanks, and over to you, sir. Thank you, Sanjay. Good morning to all the participants. Before I hand over the call to Mr. Mimani for his opening remarks, I would like to draw your attention to the safe harbor statement in the investor presentation. I hope each one of you would have gone through the presentation and the safe harbor statement by now. If not, please go through the same before the Q and A begins. Thank you, and over to you, Mr. Mumani.

1:37 Thank you, mister Sandeep. A very good morning, everyone. On behalf of Ganesh Consumer Products, I welcome you to our q two financial year twenty seven earnings call, and thank you for joining us today. The second quarter of financial year twenty twenty seven saw a sequential recovery in a challenging environment for the category, driven by continued progress in our value added portfolio. Revenue from operations was INR2267 million, up 20.3 quarter on quarter, though it was down 5% year on year, while operating EBITDA grew 23.6% and profit after tax grew 68.7% year on year.

2:38 B2C revenue declined 2.5% year on year with the pressure concentrated in the Qatar category, where volumes declined following changes in the state government policy. In May, the Western World Government decided to stop distributing Ada to ration shops and started to supply wheat grain instead. Local floor millers who were earlier engaged in job work for the state government, converting ration wheat into water lost their business. They have since redirected their capacity towards selling at in the unorganized segment, which has added to the competition in the open market. This affected the package strategy as a whole. As for Nielsen IQ, the package category investment declined 6.3 year on year during the quarter, and the broader package we based currently covering Tata and Mahasudhi declined 2.5% quarter on quarter.

3:35 We believe the pressure on Tata is temporary and expect the volumes to normalize in the medium term. Excluding Tata, B2C revenue grew 4.9 year on year and 26% quarter on quarter, which is a better reflection of our underlying demand for our brands. B2B revenue declined 13.8% year on year, mainly due to lower service income and softer core product volumes. E commerce, including quick commerce remains our fastest growing channel with a CAGR of over 53% between financial year twenty three and financial year twenty six. And we are now expanding our e commerce presence in the other regional markets like Bihar and Assam.

4:24 Sadhguru delivered a strong growth supported by our target... Targeted marketing campaigns involving Rovindra Ganesha. We continue to widen the portfolio with recent launches across all blended and cities in prices, Savudana and Soyachan. We now offer two seventy three SKUs compared with two fifty three SKUs at the end of financial year twenty six. Spices revenue grew strongly and margins improved significantly on the back of stronger realizations. We have now extended the approach that work for Satu to Spices with new targeted campaigns featuring Parambraka, Chaturkwatta, and Laimasen as Kareli and Festure. And print, we are increasing our spend on digital channels and quick commerce.

5:14 The board has declared an interim dividend of rupees 3.70 per equity share for financial year twenty twenty seven. This reflects the strength of our balance sheet and our intent to share the benefits of our performance with shareholders. We are also aligning our manufacturing footprint more closely with our markets. We have sold our Hyderabad plant, a noncore facility in case in Joker for an FMCG player, which contributed about 1.4% only of financial year twenty six revenue. The sale was concluded for INR $325,000,000, about 2.7 times its net loss and the capital so released will be redeployed into Eastern India, where our business is concentrated.

6:12 Our priorities are unchanged, strengthening our core categories, scaling our value added and emerging portfolio and deepening our presence across Eastern India profitably. We remain deeply grateful to our shareholders, partners, employees and the entire Ganesh family for their continued trust and support. With that, I will hand over to Amit to take you through the financials. Amit, over to you. Thank you, Manish, sir. Good morning, everyone. As our MD has taken you through the business performance, I will take you through the financials. Operating EBITDA for the quarter was INR $295,000,000, up 23.6% year on year with EBITDA margin at 13%, up three zero two basis points year on year and 188 basis points quarter on quarter.

7:01 A better product mix contributed, but the larger part of the margin expansion came from lower other expenses at 80... 11.8% of revenue against 14.5% a year ago, mainly due to the freezing of advertisement... Advertising spend. For the first half, advertising spend was 1.9 of revenue in line with FY 'twenty six and we expect it to step up over the rest of the year. Profit after tax for the quarter was INR 188,000,000, up 68.7% year on year and 49.9 quarter on quarter. FAD margin was 8.2%, an improvement of three fifty eight basis points year on year. This reflects the EBITDA margin expansion and lower finance cost, which fell to INR 6,000,000 only from INR 43,000,000 a year ago following our deleveraging.

7:58 Diluted EPS for the quarter was INR 4.70 only. Our cash conversion cycle was thirty two days on an annualized basis compared to forty three days in Q1 and receivable days remained at six as a result of our cash and carry model in general trade. Our balance sheet remains strong. Cash and bank balances include... Including fixed deposit, INR $10.08, 1,800... 1,082 million of which INR $425,000,000 represent unutilized IPO proceeds. Annualized ROCE was 21.9% and ROE was 16.4. As of September 30, the Hyderabad plant has been classified as an asset held for sale at its carrying value of INR $126,000,000, and the advance of INR 32,200,000 received from the buyer has been recognized under current liability.

8:59 With the sale deed executed on October 1 for a consideration of INR $325,000,000, we expect to recognize a onetime gain of approximately INR 199,000,000. Looking at the full year, given the pressure in ATA category, we expect revenue from operations for FY twenty seven to decline by around 5%. At the same time, with an improving product mix, we expect operating EBITDA to grow by 50 to 70 basis points during the year. Even as we step up our advertising investment in the second half, we remain focused on translating operating performance into consistent cashback profitability while maintaining the balance sheet discipline we have been following. With that, we are happy to open the call for questions.

9:52 Moderator, over to you. Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question comes from the line of Nikhil from Runga Investments. My first question is on the auto performance.

10:43 So we have mentioned because of the change in government policies, our volumes have declined. And what is our outlook on the coming quarter and the next quarter? Because you mentioned around 5% degrowth in the full year level. Is it because of the softening in volumes of other category? Hey. Hi, Nikhil. Thank you for participating the the decline in the b two c revenue. So overall revenue decreased by two... 5%, but the b two c revenue decreased by 2.5%. And the main reason for the decrease in the b two c revenue was the ARTA category only. Except ARTA, the overall category has grown during the quarter. Now in the coming quarter, we we are working with our sales team and coming up with multiple strategies to combat these small flour millers who have started distributing unbranded atta in district level market. And we are having a closely watch on the overall market, and we expect the volumes to improve in the coming quarters.

11:50 Okay. Got it. Just one more thing. Currently, we see a bullish trend in wheat prices. So are we expecting any price hikes in this quarter or coming quarter to sustain our margins? Yeah. Hi, Nikhil. It will depend on the competitors step also. We will we cannot comment as of now. We will we will look forward for the competitors to take the step. We would like to safeguard our market share. Once as of now, we have got enough to stop to not to go for the price hike. But as the marketplace, we will take call.

12:40 Got it. Got it. Thank you. That's all from my side. Thank you. A reminder for all the participants, in order to ask a question, you may press star and one. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The next question comes from the line of Sanjay Manial from DAM Capital Advisors Limited. Sir, just want to understand your strategy for non West Bengal regions.

13:30 How has been the growth over there? And what is the strategy now for the growth over in next few quarters? So we hi, thank you, Sanjay. So we are very much focused in expanding our distribution network in the nearby states, including Pashkar, Ubiza, Adham and Bihar. So in a very short term, the strategy is to onboard new distributors, CNF agents. And in a very recent activity, we have we have entered into an alignment with multiple few ecommerce players in in Bihar and Assam region. We are present on the ecommerce ecommerce and ecommerce channel also there. Apart from that, on an long term basis, you asked me the the strategy is to set up a manufacturing plant in Bihar.

14:26 Considering Bihar as a as a big growing state, it becomes logical. Set up a plant locally and cater to the local market with better supply chain efficiency and and source feed from the same market. So this is a long term strategy, and if you ask the overall growth, Bihar market on a quarter on quarter basis has almost doubled. Again, the base is small for the previous year, but yes, if you ask the numbers, it has doubled over quarter on year on year, Bihar and Assam. Okay. And if you can also give some color on how has been the if there is any sort of change in our strategy on the spices side, how has been things working on the spice category, growth rate and again what probably lies ahead as far as that category is concerned?

15:27 So firstly, we are very much focused to improve the realization on these prices category. It's been around two, two and a half years. We launched the CBD segment and around one one and one year that we launched the blended Matala, and we are continuously working in product development and process improvement in these spices category. So everything is going parallelly, but the one focus is that we should increase the realization. As we had discussed in our previous calls, the prices which we had set for these spices category over the previous years were very aggressive compared to the local local players here. So the first focus is to improve realization and which has resulted in better margins, the spices category in the quarter.

16:16 And apart from that, the prices category on a YTD basis has grown at around 17%. On a YTD basis, again, on a quarterly basis, it has grown more than 20%. So these two, three strategies are there in mind to improve the product quality, improve the product offering, and to improve the realization through price increase. Right. Also, probably lastly, just want to ask about these two as a product given the fact that last year we had faced issue from an extended monsoon and sort of smaller summer days. But this year, this situation is not there. And so how things are as far as that product is concerned?

17:05 What kind of a run rate we we can achieve, say, on an annualized basis? So on the first two front, as you correctly highlighted that this year, this summer was a bit extended and then a new year was year rather. And we did the marketing campaign involving. Right? So which resulted in the growth in these two categories. You see the... On a volume basis, the category has grown at more than 10% on a volume basis only. Because... And the campaign started from April. It was when the monsoon had already started from March. That way, we feel the campaign plus the distribution has paid off for these two category, and we'll look forward to a similar and a better growth in the in the coming season months.

18:13 The next question comes from the line of Ankit Babil from Sukham Ventures. Please go ahead. Morning, sir. Good morning, Ankit. Yes, yes. Sir, you did mention about the pressure you are facing on the top line in FY 'twenty seven. But what's the outlook on FY 'twenty eight on the base of FY 'twenty seven? What kind of growth we are looking at? And which categories you believe would lead the growth? Now as I have thank you for asking the question. So for Satu, as we said, since we have onboarded Arvinda Jadija for the campaign and spices, we have onboarded two Dollywood actors. We are hopeful that those category will do well in the coming quarters and in the following year.

19:07 But, again, for... On an overall basis, it will be a bit early to comment because things are shaping up. As I told you, the ARTA category, are... We have introduced couple of strategies. I I don't think we have to explain the strategies. It will be a better forum to explain these strategies now, but we have introduced couple of strategies starting November 1, and we we are very much confident that things should move in a better direction. So our priorities obviously remains unchanged to strengthen our core category in in our core market and to expand our distribution in the nearby geographies. Maybe in q three... By end of q three, we'll be able to comment on the better features of the coming year.

19:54 Okay. And you also mentioned that the margins in FY 'twenty seven will improve by some 50 to 70 basis points. So again, is there a chance of any further improvement in margins in the coming years? Or do you believe they will sustain at these levels? So on a conservative basis, it should sustain at this level. But as the as I told you, we have increased the realization of these prices category. And as the value added and these prices category grew, there will be a natural expansion in the product margin. These are the... As we had discussed over previous calls that we are introducing rather working and introducing new product ranges, right, including snacks, packaged foods. It is work in progress. So we will have to redeploy some of that extra additional margin to those categories also.

20:46 So on an average, if you ask me, we feel that we will be able to deliver similar margins in the coming year also FY 'twenty eight. Okay. And in the spices category, what kind of revenue you are expecting this year? And will it be a breakeven or will it continue to make losses here? No. Spices, firstly, the spices category will be better than breakeven in this financial year because we are very much committed to not lose money in these prices category. And secondly, we feel that on an overall year basis, the growth should be in a good double digit. If I'm not wrong, your category was around INR 40 crores or somewhere around that last year.

21:39 Forgot the What was the revenue last year? And what revenue you're targeting this year in spices? So last year, the revenue was close to INR38 crores to INR40 crores, as you correctly highlighted. And this year, again, I told you, till six months, we have delivered a growth of close to 20% and in the coming quarters also we feel that we'll be able to deliver a similar growth. Okay. Okay. And last question is within your product categories, excluding spices, which product category has the highest margin? And the lowest? Think this will be a good time to discuss the product level margin.

22:26 But yes, value added category enjoys the better margin as compared to a big large category, would be plus category and emerging product. The virtue of better margins in these prices and the industry average margins and emerging product enjoyed better margins compared to the value added category. This is the industry Okay. That we Then can you let me know what is the share of value added products in your total revenue at least? The share of total revenue this year, it will be more than close to $2.62 crores to 65 crores. Okay. That's helpful. Thank you so much. Thank you. Thank you. The next question comes from the line of Praveen Sharma, an individual investor. Please go ahead.

23:16 Yeah. Hi. Good morning. I have couple of questions. First is, you know, just a comment. We need to... You know, on this diversification from the geography, it seems, you know, it has to be expedited because sometimes this, you know, competition is more sometimes best one goal policy, you know, stopping the floor and the middle is dumping in the market. So it's becomes very geographically centric business operation. So immediate need is to diversify. I know that you guys are doing it already, but need to accelerate it. This is just a comment. The first... The question is how much was the advertisement to spend in last year, and how much was it in the first half, and how much do we expect in the second half? If you can just pour light on that.

24:08 So last year, again, based on the revenue, it was 1.9% around INR 16 crores. And this first half, the overall spend was close to INR 67 crores. And for the entire year, we feel that the advertisement spend will be in line with the previous. Previous year. So 60 crore? Not 60. $1.60. 60. Was the number previous year. Yeah. And how much is the h one? I missed it. Close to 7 crores. 7 crores. Okay. Okay. Okay. The second the second question answering and and taking your comment which you correctly suggested. We are very much focused to expand our geographical network with onboarding new distributors and agent.

24:59 And as I told you that considering the supply chain scenario in the overall country, the wheat prices prevailing in UP, BR, MP, and Bengal, plus the the the transportation cost, which I think everyone is aware of, we are working free every hour to make our product available in those geographies and improve our sales there. And hence, we decided that we should have a ARTA plant wherein the CapEx amount is also not not that large as compared to a large meat. That will help us to be available in the... To make available a fresh product in the local geographies of Bihar and Ataam. That is work in progress, and we are working towards completing that project in a in a best possible timeline.

25:48 Okay. And and, again, the first mindset of the of the management, the board, and the company is to earn profit on a cash and carry basis in in the geographies we are dealing in. So with that purpose, we are working towards the growth in those order. Yeah. Yeah. You know, I must congratulate you guys on keeping the balance sheet exceptionally well, you know, working capital cycle that everything is just phenomenal. And I hope it goes... You know, you will continue going it forward in the future also. The second question is on the the land purchase plan in Assam. Is it done in the stream and sealed that the land has been acquired or it's still work in progress? And Bihar land, you know, the floor mill thing which we are thinking about, do we have a land for that, or we don't require much land and we will lease it out?

26:49 So firstly, I think we have Phone what? Disconnect. We have these we have these upload in Bihar, Muzakarpur from Bihar Industrial Development Authority. So it is a leased land, a long term leased land. And, again, the land is in our position. We have bought the position. We have paid the entire amount, and we are... We have onboarded an architect for the... For designing the entire plant, and we have onboarded a consultant who will help us in setting up the meal. So it is work in progress, and we are targeting to start the start the civil work anytime by end of q three or early q one or q four. So this is on behalf. Now coming to Assam, we have paid an in... An... Our token amount to the seller. Right? And the due diligence, we have onboarded a legal personnel who is based out of who has done the due diligence as well. So all the necessary formalities, which is required at the local state level, wherein we have to submit some application and request to the local government. So that is work in progress, and we are hopeful that the transaction will get concluded for Diwali.

28:05 Okay. Great. Great. This capital work in progress for the September is 16 crores, which was... You know? So just to to understand, this is about the sweet and snack machinery, or this is about the lands and the civil structure we are planning in Bihar and Assam? So it is... Majorly, is of... It has two piece to it. One is the wheat and snack plant, which is getting getting commissioned near Calcutta. And the second piece is is the new corporate office where we plan to move in the next month because the current corporate office where we moved in around seven, eight years back is smaller, and we are operating two offices now. So it is for better synergy.

28:55 We are... We have taken up office around two years back in Salt Lake, and we will move there. The entire team will sit out under one roof. So these two are the major chunk in the capital working program. Okay. And this is our own bought out office space, or this is Yeah. It is a bought out port out office space. And the... Currently, it is a rental currently, it is a rental office. So, again, that expense will will be there from The saving range. Yes. Okay. And my last question on the sweets and savories, will it be limited to West Bengal only, or do we plan to launch it on ecommerce and, you know, in other geographies? Because these have higher shelf life. And I think with the great... Growing interest in the traditional and sweets and snacks, you know, there would be enough demand for our products in other geographies also.

29:52 So what is the strategy on that? Because that seems to be very promising, the kind of multiples which this... These kinds of business, you know, they actually work on in the, you know, in the markets are very different. So if it's become successful, plus we spend every... I think, you know, it will be a major growth accelerator for the company. Correct. So on a on a immediate basis, the plan is to to introduce the category in the West Bengal market on all channels, including generated and modern trade. And and do manufacture here. And somehow, the the knowledge which we have on the snack is that we cannot manufacture a snack in and ship it to Bihar.

30:40 It will not make sense as of now. So, again, once we enter into this category with a focus to expand in the investment world market, Then we will analyze the category and will plan how to expand the product in the nearby geography. Okay. Okay. These are just the savories, like, apart from sweets, or they are, like, ready to eat, you know, products, like, you know, you know, ready to eat and ready to cook. So the... So snacks is ethnic snack, which is cannot chew, namkin, kimchi, etcetera. Not for a western snack, which is chips and all. Only ethnic snack. And sweets are... We are introducing three fourth sweets, right, which is your zone property, then based on Ladu, which is not readily available in the local shops. So if you see the West Wing wall dynamic, every 100 meter, you will get a suite shop, which is.

31:40 Right? So that's why we are introducing this Raju Barthi based on the two and one property in the Indian region. And we are ready to instant... Ready to cook and instant mix. This is work in progress. We are working with a renowned consultant, right, to develop that category, and I don't think we should comment it on this now. But, yeah, it is working progress. So we control the raw material of all these snacks, sweet, and proposed ready to cook and instant message. So that will be a synergy, a value addition. Great. Great. Good luck, and keep the good work doing. Thank you very much for giving me the opportunity. Thank you. Thank you, Ganesh. Thank you.

32:42 The next question comes from the line of Divi Gosar from Subcomm Ventures. Please go ahead. Hi, sir. Thank you for this opportunity. Sir, in the first half, f I twenty seven, our EBITDA margin has been 200 bps more than the last year. And we are guiding for a 50 to 75 bps margin improvement for the full year. So do you think there'll be pressure in h two in terms of margin? So Fifty two seventy. So that 50 to 70 basis point improvement is from the last year. Right? So the EBITDA margin will be in the range of 10.5 to 11%. This is what we are targeting. Now your...

33:28 I understand your question since the six months margin is this. So obviously, your q two, the second half margin will be lower. Again, it is not a pressure or a aggressive scenario. Just like if you see the overall landscape of this category. So the wheat wheat wheat raw material, the gram raw material, all these prices raw material are Ravi crops. Right? And the season starts from March, end of March, early April. So the... These... The prices of these materials remain softer during the first two quarters when... And and we enjoy better margins in these two quarters. And, structurally, the second half margin in a financial year remain lower as compared to the first half margin. So it is structural, and, obviously, we'll not go go ahead and bleed money by doing random advertisement.

34:23 Everything will be planned. But, yeah, the margins will be lower as compared to h one. Got it. Thank you so much. Thank you,. Thank you. Participants may press star and one in order to ask a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, we will take this as the last question for today. I now hand over to the management for closing comments. Over to you, sir. Thank you, everyone, for joining us today and for your questions. Despite pressure in the auto category, we saw a sequential recovery in revenue, continued growth in our value added portfolio and a meaningful improvement in profitability this quarter.

35:17 Our focus over the coming quarters is on executing the launches and expansion plans we discussed today. If you have any further questions, please feel free to reach out to us or to our investor relations adviser. We look forward to speaking with you again on our Q3 FY twenty seven earnings call. Thank you. Thank you. Thank you. On behalf of Ganesh Consumer Products Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.